Cash lifelines for ailing US
pair Legend and Vanguard
RAMON LOPEZ/WASHINGTON DC
US BUSINESS carrier Legend Airlines, which ceased flying
in December, plans to resume
operations this month after receiv
ing a $20 million cash injection
from new investors. Another strug
gling US carrier, low fares special
ist Vanguard Airlines, has also
received a cash boost, including
$7 million from aircraft lessor
Pegasus Aviation.
New York-based Legend Fund
ing Group will invest $20 million
in the Dallas Love Field-based air
line as long as a federal bankruptcy
court protects the cash from credi
tors, giving it a 3 5 % stake in the
carrier. Staff will own 21 % with the
rest controlled by creditors.
John Pincavage, who assembled
the investor group, says the airline's
new strategy will be in place by
April, by which point Legend
should be breaking even again. He
adds that Legend will retain its all-
business class product, and insists
"there is a place for this type of ser
vice" in the US market.
Legend aims to resume opera
tions later this month, with flights
to Washington Dulles and New
York LaGuardia. Services to Los
Angeles and Las Vegas remain sus
pended, but those to San Jose
should resume by mid-year.
Legend's seven 56-seat Mc
Donnell Douglas DC-9-30s
remain airworthy, having been
used for charter work during the
shutdown, which the airline
blamed on a cash-flow crisis stem
ming from the accumulated effects
of high fuel prices, high start-up
costs and legal fees associated with
Vanguard's Boeing 131s are to be joined by MD-SOs
its protracted battle to launch from
Love Field.
Meanwhile,Vanguard, which
has struggled since its launch in
1994, has received a cash injection
totalling $ 14.5 million - $7 million
from Pegasus and $7.5 from two
private investors who retain con
trol of the Kansas City, Missouri-
based carrier.
The Pegasus cash includes $3
million for the purchase of pre
ferred stock, giving it an 8% stake,
with affiliate International Aero
Components providing $3 million
secured against present aircraft
spare parts, plus an additional $1
million for future parts purchases.
The investment is part of a strate
gic deal which will see Vanguard
take six Boeing MD-80s (and
options on two more) from the
lessor, plus two spare Pratt &
Whitney JT8D-219 powerplants.
The MD-80s will complement
Vanguard's 13-strong Boeing 737
fleet, providing "the optimal inter
im solution" for improved reliabil
ity and growth, says the airline's
new president and chief executive
Jeff Potter. The 7 3 7s will be retain
ed until the end of this year at least.
Vanguard took a $4.7 million net
loss in the third quarter of last year,
blaming stiff competition from
Southwest Airlines and high oper
ating costs. •
Ukraine International
gets European cash
IN ITS first investment in a CIS airline, the European Bank of
Reconstruction and Development
(EBRD) has agreed to inject €6.5
million ($6.1 million) into Ukraine
International Airlines, giving it a
9.9% stake in a carrier that ranks as
the country's second largest in
terms of passenger boardings.
EBRD bought the shares from
the Ukraine State Property Fund.
The cash has already been injected
into the airline. Shareholders inc
lude SAirGroup and Austrian
Airlines (a combined 25%) and
debis AirFinance Ireland (7%).
The balance remains in Ukrainian
control via the state property fund.
• A court in Irkutsk, Russia, has
approved a move to pass control of
the bankrupt but still operating
Baikal Avia to a committee of cred
itors, terming the deal "peaceful".
The committee will manage
the airline's limited operations
while seeking potential buyers. J
NEWS IN BRIEF
• INDIA TAX CAP
The Indian Government has
agreed to cap aviation turbine
fuel sales tax at 4% in order to
encourage services to remote
areas of the country. The tax
currently varies between
states from zero to 36%, limit
ing commuter and air taxi
operations. A bill imposing
the tax cap will now go before
parliament.
Milan airports compromise approved by EC, attacked by Alitalia
ANDY NATIVI/GENOA
THE EUROPEAN Com mission (EC) has approved an
Italian Government proposal
aimed at assuaging airline griev
ances over the distribution of slots
and flights between the two Milan
airports, Malpensa - which opened
in 1999-and Linate.
The EC rilling, which could end
a four year Jegal row over the
forced transfer of traffic from
Linate to Malpensa, endorses a
plan increasing the number of
available slots at the two airports
from 83 to 88 per hour. Malpensa,
unpopular with foreign carriers,
will remain at 70 slots an hour, but
Linate - preferred because it is
closer to Milan city centre - sees its
allocation rise to 18 per hour.
The increase will allow for the
launch of new routes linking Linate
with Helsinki, Copenhagen and
Vienna, and a second daily flight to
Frankfurt. Some of the 12
European airlines involved in a
legal action against Rome over the
Malpensa transfer are not satisfied
with the compromise, although
with a filing at the European Court
of Justice their sole recourse, they
may have to accept it.
The EC decision is bad news for
Alitalia, which fears that an
increase in flights from Linate
could damage the competitiveness
of its Malpensa hub, compromis
ing a new strategic plan already
under fire from some quarters.
The flag-carrier's chief executive
Domenico Cempella criticised the
Milan compromise, which has
prompted speculation that he
could resign over the issue.
Complicating Cempella's future
is the fact that the Italian Treasury
Ministry has taken charge of the
53% stake in Alitalia - worth
around L3,000 billion ($1.5 bil
lion) - previously controlled by
state holding company IRI.
State-owned SEA, which runs
the two Milan airports, says the
EC's decision clears the way for
programmes including a new cargo
centre and maintenance hangars,
with L200 billion to be invested
this year alone. •
FLIGHT INTERNATIONAL 9 - 15 January 2001 21